What is Inventory Management? / Why it is important? / Points for Managing your Inventory? / Benefits of inventory Management.
What is Inventory Management?
Inventory Management is the Process by which and Organization manages its Physical stock that you buy for Sale. It is nothing but Controlling the inflow and outflow of products from the point of procurement to the Final sale. This include tracking inventory by location, choosing when to submit purchase orders and fulfilling sales in an efficient manner.
Why it is Important?
Inventory Management is important to a wide range of business including Distribution Organization, It is crucial to prevent loss of items, quickly fulfil customer orders and know when you need to buy more of a given product. It contributes directly to profitability, and managing your business much easier and more efficient while providing you with real-time data to inform business decision. No business can successfully scale without an inventory management process in place.
Secret for Managing your Inventory:-
- Prioritize your Inventory: - Based on experience and past track record we have to identify first what our customer needs. According to that we have to categorizing inventory into groups as per there moving cycles
- Fast Moving: - We determine which products are the most valuable and are in demand more in industries, due to their application. These products contribute greatly to the profitability of a business. It is always recommended to maintain 70% of your total inventory for fast-moving products.
- Slow Moving: - It is a midrange product that is important to sell, but it does not sell at the same rate as fast moving items. To ensure customer satisfaction and to avoid longer delivery periods, 30% from your total inventory must be reserved for slow-moving products.
- Non-Moving:- If specific stock that hasn’t sold at all in the last six to 12 months, It’s comes in Non-Moving categorize. At that time stop stocking that item and also consider different Strategy for getting rid of that stock by giving Special discount because excess stock wastes both your space and capital, also items in warehouse sitting around for too long might become damaged.
- FIFO Methods: - First in first out are accounting methods used for product move through your warehouse. FIFO method insuring that most recently received material is the first out the door in simple world add new items from the back so the older products are at the front. This keep inventory as a new as possible, which is essential for perishable or expiring goods.
- Audit your stock: - While inventory is sitting in Storage, It is essential to actually count your inventory to make sure what you have in stock matches what you think or your system shows you have. There are different techniques including monthly, weekly or even daily spot checks of their hottest items, which can be most useful for products that are moving fast or have stocking issue. Regular inventory auditing is critical to keep the percentage of vanished goods as low as possible and this process helps for stock reordering.
- Reorder Level: - The reorder level of stock is the fixed stock level that lies between the maximum and minimum stock level, an order for the replenishment of stock should be placed. It is also refer as a recorder point refers to the inventory level at which a seller place an order with its supplier to maintain stock at a certain product.
- Drops hipping: - Is an order fulfilment methods in which the supplier ships products directly to the customer. This process cuts out the need for a storage facility or keeping any inventory in hand. It is best reserved for rare orders or items you cannot accommodate in your warehouse.
Benefits of inventory management for Business:-
Inventory Management is critical to a business’s profitability and scalability. Without an efficient inventory management process, business could find themselves wasting money on products they can’t sell, running out of stock and causing fulfilment delays that upset customers. As a result, these business could lose valuable items, which immediately eats into profit margins. An effective inventory management process can prevent these issues and offer the following benefits.
Higher Customer Satisfaction: - In today’s working environment customer expect rapid fulfilment of orders. An effective inventory management process ensure that your products are always in stock to complete customer order. This boots customer satisfaction and increase the confidence in customer and that you will gain repeat business.
The whole goal is to make sure you have the products you’re managing and that you can support fulfilment. It’s advantage of knowing where your demand is coming from and allocating your inventory to those orders.
Traceability of Inventory: - This includes knowing when a supplier has shipped the Products, when the products arrive at your storage facility, where the products are moved to within your facility and when the products have been shipped out of your facility to a customer.
Loss Prevention: - A major issue with large size inventory management is the loss of products, known as inventory shrinkage, especially when inventory management controls are not in place. Without regular audits, items could go missing for long time and you can not know why. Regardless, every missing item is wasted investment.
A regular cycle count should be baked into your inventory management process to help you confirm the accuracy of tracking information listed in your inventory management systems. It prevent the loss or theft of items.
Consistent Inventory Levels:- An effective inventory management process also helps with inventory control, letting you know when its time to reorder products and by using experience how quickly you sell a particular item, but once you have this knowledge, you can clearly determine when you should order more.
Good inventory management solutions save time that could be spent on other activities and most important Customers that receive what they order on time are more loyal.